Health Insurance: The Biggest Challenge is to Build Trust

Health Insurance is among the most rapidly evolving sectors in India, with a compounded annual growth rate of 37 percent. In the Indian non-life insurance industry, health insurance is the second largest segment after motor insurance. While the penetration of the market is currently small (aound 21.6 crore people – less than one-fifth of India’s population), the World Bank has estimated it should have covered 50 percent of the population by 2015.

This growth can be attributed to the combined efforts of Health Insurance providers, Third Party Administrators (TPAs) and various government sponsored schemes such as the Rashtriya Swasthya Bima Yojana.

Market Size

According to Insurance Regulatory and Development Authority (IRDA) data, the health insurance industry expanded at a compounded annual growth rate of 33 percent from 2006- 12. Also, the total number of health insurance policy holders grew from 8.3 million in 2004 to 200 million in 2016. Around 15.5 crore people are covered under the three Central government-funded health schemes – Central Government Health Scheme, Employees’ State Insurance Scheme and Rashtriya Swasthya Bima Yojana.

Industry research and consultancy firm, RNCOS, states that health insurance premiums recorded a growth of 14.05 percent from `115 billion underwritten in 2010-11 up to `131 billion underwritten in 2011-12. The premiums are expected to increase at a CAGR of 30 percent during 2012–14, and reach up to `505 billion by 2016.

Growth Triggers

Rising incomes and greater awareness have added fillip to the Indian health insurance market, providing lucrative growth avenues for both the existing players as well as new entrants. The market is promising for industries which can devise strategies to overcome challenges of limited product range, price and awareness which restrain the growth.

High healthcare costs have further accentuated the need for health insurance. Coupled with this is the emergence of multi-specialty hospital chains in metro cities, which have raised the quality and cost of healthcare, hence making health insurance the need of the times.
Meanwhile, programmes such as insurance offered by NGOs; community- based health insurance; corporate insurance policies; and government sponsored schemes have enabled low-cost health insurance facilities to the citizens.

Challenges

However, despite the best efforts by the regulator, the government and industry stakeholders, the health insurance sector is gripped by a couple of challenges, primary among them being high incidents of fraud claims, lack of standard practices across the industry and long turnaround times for claims settlements, hence keeping the policy holder waiting and dissatisfied. Add to this the low awareness, lack of understanding of product features and perceived apprehensions in claims procedures and settlement, which further demotivate consumers from buying a health cover.

Also, high claims ratios and inaccurate data regarding consumer profile, disease patterns, etc often act as detrimental factors for insurers in product pricing or development of new products. Another growing concern is the rise in the demand for customised health insurance plans that most enterprises are providing to their employees. This has resulted in huge and multiple formats of data for insurers and TPAs to manage.

Policy Change

The recent IRDA guidelines are a step to address some of these challenges. With the aim of improving service standards in the health insurance sector, IRDA announced a host of new guidelines this year. First of all, it has standardised 46 most commonly used definitions/terms/conditions in health insurance policies. In order to avoid confusion and reduce turnaround time in claims settlements, the regulator has also standardised pre-authorisation and claims forms to streamline processes at all stages.

Most insurers have welcomed these pro-customer initiatives. Interestingly, the new policies have redefined the role of TPAs as well. IRDA has mentioned that hospitals, insurers and TPAs will now have a tripartite agreement instead of the conventional bilateral agreement between TPAs and hospitals.

Future Trends

With collective efforts by all stakeholders, the future seems bright for the industry. The gap between healthcare expenditure and that covered by health insurance in India is huge, up to USD 57 billion. This is projected to exceed up to USD 200 billion by 2020, which presents a huge opportunity for health insurance to emerge as a viable financing mechanism for growing healthcare spend.
Market players foresee the emergence of OPD insurance in a big way, apart from the rise of disease and case management for patients.